Capitalism is a bubble.

Ideally a profitable company or industry attracts money from lenders and investors who want to get a piece of the action.

One way it goes awry is when a huge chunk of that money goes not to R&D or marketing or mfg, but into a CEO’s pockets. It disrupts the natural process of resource allocation. Think how much the computer & software industry could’ve done if $50Billion hadn’t gone into Bill Gates and others pockets.

Another thing which has been a growing problem (in a way) is the lightning speed at which information travels. Now when there’s a hot stock or industry, then everyone jumps on and sucks money away from other things. If there were a thousand little bubbles it’s one thing, but one giant bubble and the usual collapse can cause huge problems.

Another giant problem we’re facing today is manufactured bubbles of a magnitude we aren’t used to seeing. Sure 1929 was partly manufactured, but that was the whole market. Now it’s more regulated and harder to rig. But, we’ve seen housing which is a huge national ‘market’ rigged by Phil Gramm & buddies who simply changed a law. It’s scary. Then they go into the oil market and speculate — that has worldwide consequences, though the market is probably pretty small in terms of the number of players. Now we’re talking about a possibility of Fannie & Freddie being played. This is horrendous and mostly the result of having sociopaths running things.

I’ve started buying gold.

A bit late but still…

Very very late.

Consider this, if you’re late that means others were earlier and they’ve bid up the price. So, you’re buying higher than they did and perhaps buying at THE HIGH.

So, watch closely whether the dollar turns and becomes stronger — that’s when you sell — or if the dollar keeps dropping — that’s when gold keeps going up. Gold and the dollar tend to be inversely related.

With a Dem administration appearing to be on it’s way you need to watch the dollar closely. Yes, you’ve bought late, but you might still make a buck or two before the final HIGH hits.

This is common sense and not advice you’ve paid for or that I have an interest in. Caveat Emptor!

the entire monetary system of the fed is a ponzi scheme;

they print money, then give it to us a a percentage above the value of that money, (this is the prime) and we are supposed to pay all of that money back including that prime

this means there is never enough money to pay back the debt we aquire by getting the money in the first place

it is a bizzare model to be sure

There has always been a lot of optimism in America and we’ve been lucky enough so far to make it work. I don’t know whether we were exporting that feeling to 3rd world countries or if maybe there was an intentional plan to make them fail and come under our control, but the IMF did just what you said — offer money which with interest payments is too much to be repaid.

Was it a case of our confidence in our system being so great that it had to succeed everywhere else?

I think here there was a slightly more refined view of the system which said the interest rate put pressure on borrowers to know what they were doing and do their best to gauge their ability to repay — or put another way, they needed to know how much profit they could expect from their enterprise or investment and whether that allowed them to repay the loan with interest and profit to boot.

Can we expect the same sensibility from people who live in different cultures and with somewhat different political systems and histories?

In any event it’s pretty clear the power of the Fed to set the interest rate is powerful and the ability or lack of ability of the borrower to properly estimate their ability to repay is variable in the extreme.

Perhaps we’ve just been lucky and optimistic beyond any reason to be.

that was like a great class. thank you very much. does that guy even know how good a writer he is ?? fabulous. and I look forward to reading y’all’s comments on it.

did you see Roubini ? – 6 min

I could actually understand the good Professor after reading Numerian. Thank You

Nationalizing them seems like as good an idea as any particularly since they used to be part of the government anyway and the impact of the proposed bailout is going to double the national debt. If I were going to double my personal debt I sure as hell would want to get something in return for it. Not just pour an unlimited amount of money down the drain with nothing to show for it and no end in sight.

However, if the result of not bailing them out is financial armegeddon whereas bailing them out means the US government loses its AAA credit rating. I say NO WAY to a bailout. Either way is pretty bad but I am betting that we will not recover in my lifetime from losing the AAA credit rating. I sure as hell don’t want to be paying for all this stupidity in my old age.

Having credit available to buyers means they values are bid up because there is apparently too little housing stock.. since population is expanding faster then the housing stock is built. So real estate property only remains stable in cost when the demand is low or nil.

Of course you need to figure in the depreciation of things over time so real estate should be decreasing in value, unless it is well maintained and improved or unless the demand “artificially” raises its value.

Some bubbles inflate faster because they can be used for investing (self fulfilling) which drives the prices up. This is the BS about rising tides raise all ships and so everyone makes out. The speculators and investors inflate the bubble and then cause the collapse.

The deal with housing is that almost all americans are hooked into it since everyone needs to live on real estate and none is outside of the market. So this is taking everyone down and there is really no way to stop it.

Dotcom bubble hurt investors who wanted to get rich quick by gambling. Housing bubble has those guys at work but they were messing with everyone’s homes.

Investors need bubble effects to make out and will move from one to the next because it doesn’t matter as long as the “asset” is inflating quickly, money is to be made trading this “asset”.

Capitalism is a bubble.

Bob in HI